Suppose… Show more ^Use above graph to reference the next

Suppose… Show more ^Use above graph to reference the next set of questions… This is how far I’ve gotten: Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods and services in this economy. The increase in production costs causes a shift from SRAS1 to SRAS2, and moves the economy from point A to point B in the short run. The short-run economic outcome resulting from the increase in production costs is known as stagflation. ^^That’s what I already completed (some of it was fill in the blank) and I know for a fact that it’s correct. Below is what I need help with… If, during the transition from the short run to the long run, firms and workers respond to the initial shock of severe weather by negotiating higher wages, the economy will move from the point you just found to point _______(?). In the absence of government intervention, the level of employment and output attained in the short run will eventually begin to put _______(upward/downward) pressure on wages and prices as the economy transitions from the short run to the long run. In the long run, the price level in the economy will be _______ (?) and the quantity of output in the economy will be ______ billion (I’m guessing 80 billion since that’s what LRAS is at). • Show less